Bacardi wins round in Havana Club fight

A federal appeals court has ruled against a joint venture between the Cuban government and Pernod Ricard in ongoing international legal wrangling with Bacardi over the rights to the Havana Club rum brand.

The U.S. District Court of Appeals in Washington on Tuesday upheld a move by the U.S. Treasury Department to block a Cuban government-owned venture from renewing the Havana Club trademark. The federal agency’s Office of Foreign Assets Control had cited a 1998 federal law that prevents the registration or renewal of U.S. trademarks tied to companies nationalized by the Cuban government.

Pernod said Tuesday that it would, along with Cubaexport — its partner in producing and distributing the rum, seek a rehearing.

Tuesday’s ruling, which has no effect on the Havana Club trademark in other countries, adds to a cocktail of court opinions stretching from the U.S. to Spain in the percolating Havana Club legal spat.

The legal dispute between Pernod and Bacardi over the Havana Club label dates back years and is rooted in the Cuban revolution. Pernod sells rum under the brand outside the U.S. through a joint venture with the Cuban government.

So far the U.S. courts have sided with Bacardi based on the 1998 federal law that prevents the registration or renewal of U.S. trademarks tied to companies nationalized by the Cuban government. Cuba had appealed the most recent case to the U.S. District Court of Appeals in Washington, setting up Tuesday’s 2-1 decision by the federal appellate panel.

In a ruling last month, the Supreme Court of Spain confirmed ownership of the Havana Club trademark in Spain by a Pernod Ricard joint venture. That was the third time the Spanish courts rejected Bacardi’s challenge to the joint venture’s rights over the trademark. The joint venture’s ownership was previously recognized by the Spanish lower court in 2005 and then again on appeal by the Provincial Court of Madrid in 2007.

Bermuda-based beverage giant Bacardi has said it will fight the Spanish Supreme Court ruling.

Last year, Bacardi USA Inc. won a key round in its legal battle with Pernod over sales of the Havana Club rum brand in the United States when a federal judge in Delaware rejected Pernod’s claims that Bacardi’s use of the Havana Club label is misleading because the rum is not made in Cuba. The judge ruled that Bacardi’s product says it is made in Puerto Rico and is derived from a 1920s-era Cuban recipe.

Pernod’s appeal of that ruling remains pending.

Spain and the U.S. have been the top two markets for the Havana Club brand and the main fronts of the legal battles between Pernod and Bacardi. Bacardi acquired the U.S. trademark in 1994 from the Arechabala family, its original owners. The Cuban government expropriated the Havana Club name from the Arechabala family after the 1959 revolution on the Caribbean island.

Bacardi claims that the move by the Cuban government was illegal, and it released Havana Club in the U.S. in 2006. Unlike the rum sold by Pernod, Bacardi’s rum is made in its plant in Cataño, outside the Puerto Rican capital of San Juan.

Cuba says it registered the Havana Club trademark in the U.S. in 1976 after the Arechabalas let their claim on it expire. It has sold the rum internationally since 1993 in a joint partnership with Pernod that excludes exports to the U.S. because of a longstanding trade embargo.

Cuban trademarks have been registered in the U.S. in anticipation of an end to the embargo, and for the same reason U.S. companies regularly register trademarks in Cuba even as the 1963 U.S. embargo blocks most trade between the countries.

The true argument is over who can claim to produce authentic Cuban rum — especially if the country opens up to global commerce.

Bacardi, a family-owned spirits conglomerate founded in Santiago, Cuba, in 1862, pioneered the light, dry smoothness Cuban rum is now famous for, devising a charcoal-filter system and aging in oak barrels for added sweetness.

But the Bacardis joined the fiercely anti-Castro exile community in Miami after Fidel Castro nationalized the company in 1960. Havana Club, like all Bacardi rums, is made in Puerto Rico — and says so on the bottle.

Cuba and Pernod spent $70 million to rehabilitate a Havana Club distillery specializing in darker añejo rum in San José de Las Lajas.

Even without the U.S. market — 40 percent of world rum drinkers — Cuban Havana Club has seen its annual sales soar 13 percent to 3.5 million cases in 124 countries. It now accounts for 5 percent of the world’s rum market, taking the fifth spot among leading rum brands.

Bacardi’s more than 200 brands and labels sell 20 million cases in 150 countries every year. Bacardi rum holds an unrivaled 35 percent of the global market, according to the International Wine and Spirit Research report.

Diageo’s Captain Morgan brand, which is at the center of a heated rum war between Puerto Rico and the U.S. Virgin Islands, has carved out a roughly 16 percent share of the global rum market. The Dominican Republic’s Brugal is in the fourth spot with a nearly 7 percent market share.